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Gaurav Bora (Market Expert)
Due to the corona virus pandemic the world economy has degraded to terrible levels. With economies of different countries coming to a halt, countries having their manufacturing hubs in China are now looking forward to shifting their units to countries like India. All developed economies want to shift their manufacturing hubs from communist country to democratic country. China’s reputation and accountability as supplier has been hampered very badly due to COVID 19 pandemic and other south Asian countries like India, Vietnam, Thailand and Indonesia will be biggest beneficiaries.
Japan has earmarked $2.2 billion of its record economic stimulus package to help its manufacturers shift production out of China which shows so much priority they are giving to shift their production out from China. Already many Japanese companies are working in India since decades which are doing well so Japan will give priority to India. South Korean companies are in talks to pull out their manufacturing units from the communist nation China to favourable nation India. Koreans have already made requests for two iron and steel companies, some start-ups and one from the hospitality sector, to transfer these units from China to India. Indian govt previously showed interest in setting up Posco and Hyundai Steel factories in Andhra Pradesh, while also informing that the two companies agreed to setup units in the state if they made some investments. India is all set to become a manufacturing base for Korean companies for their global markets.
The trade war between the US and China has also created trouble for global players who are having manufacturing hubs in China. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. With the US and China tangled in a nasty trade fight, this should be India’s time to shine. It is becoming increasingly clear that it will be years or even before south Asian nations and other aspiring manufacturing destinations are ready to replace China as the world’s largest manufacturing hub. And India’s strong relationship with US will give some additional benefits to India and India’s strong leadership is also a big reason India will be on priority for companies wants to relocate their manufacturing facilities to India.
Advantages for India:
• India has lowest labour cost. After China, India has been perceived as a low-cost production place, so world is now talking about a shift to India as the next factory to the world. According to the latest study conducted by US News & World Report India has been ranked 2nd for best cheap manufacturing. Indian people are honest, hardworking, talented and reliable.
• India’s youngest and largest population is its biggest advantage. Other countries like Vietnam and Indonesia with less than one-tenth China’s population, is already running into labour shortages as global manufacturers rush to set up shop here to avoid US tariffs.
• India has become a highly competitive investment destination post corporate tax reduction as the rates are now lower than that in China and most Southeast Asian countries. No country is offering 15% tax rate where India is giving 15% with no MAT (Minimum Alternate Tax) and simpler taxation structure. Government already created stage in last year only to attract countries to set up plants in India.
• Make in India scheme a Swadeshi movement to encourage companies to manufacture their products in India and enthuse with dedicated investments into manufacturing. As per the scheme 100% Foreign Direct Investment (FDI) is permitted in 100 sectors.
• India’s own internal consumption story is very strong which is biggest attraction for global companies.
If companies come out from china to India then manufacturing activities will flourish like anything. With this manufacturing revolution India is going to create a middle class of some significant size in India based on economic prosperity. Ultimately will make a way to prime minister’s dream to be a $5-trillion economy and that will be a good source of prosperity for people. We are in an exciting time because every bull market tells a story and the story of this bull market has been that India is going to surpass like Japan did in the 1960’s when it went from a world’s 3rd powerful economy to a 1st powerful economy even pass over US behind through manufacturing revolution. Japan’s stock market had its biggest Bull Run in 1967 to 1990 index Nikkei become 1266 to 38,700.
Indian Markets may show Mega Bull Run of Long Term..
